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Vacant Commercial Property Insurance Explained

High vacancy rates across Australia are creating numerous difficulties for Commercial Property Owners, especially when it comes to insurance.  Very few Insurers are willing to provide insurance for these buildings that are fully or even partially vacant, and those that do are demanding high premiums and excesses.

Why is Vacant Property so difficult to insure?

The last 12-18 months has seen insurers tightening the screw when it comes to insuring vacant commercial property, especially regarding industrial property where vacancy has been on the increase. A rise in serious claims nationally has also been a driver behind this, mainly caused by resultant damage to the property from thieves stripping valuable items such as copper pipes and fixtures.

Some examples of claims that can occur at vacant locations;

Vandalism such as graffiti and broken windows

Leakage of hazardous or toxic substances which can contaminate the soil or groundwater

Drug users or squatters could move in, cause damage and refuse to leave

Unlicensed parties could be held, causing damage to the property

Suppression systems might be turned off, so if a fire starts it could spread and cause a total loss

Are there any policy conditions when insuring vacant property?

Insurance for vacant property is typically placed under a Business Package type policy (Difference between ISR policy and Packaged Policies).

However, there could be certain conditions placed on a policy insuring a vacant property which include:

The premium could be non-refundable, even if the building becomes tenanted shortly after placing the vacant property policy.

Insurers may only be willing to offer a 6 month policy.

There is likely a much higher property damage excess – sometimes as high as $100,000 for large industrial complexes

The property must be insured under a company name (ie Pty Ltd), not a private owner (ie Mr & Mrs Jones).

The property must be professionally managed and inspected at least every week.

Structure of a Vacant Property Insurance Policy

The basic coverage requirements for vacant property are to insure the Building itself (including Glass) and Public Liability against Third Party property damage or injury. As a location becomes larger or more complex, the following sections of cover can be added to the policy to increase the level of insurance protection:

Main Coverage Sections


Covers any damage, loss or theft against your buildings and property.

Public Liability

Covers the cost of legal action if a third party or their property suffers damage whilst on the premises.

Additional Coverage Sections and Policy Options


Separate to Building cover (under a Business Package type policy), this covers against the cost to replace any windows or glass that suffer damage/broken.

Machinery Breakdown

Complex coverage for large machinery, plant, and mechanical equipment, with options to include coverage for the resultant business interruption costs.

Additional Increased Cost of Working

This provides coverage for advertising costs, rent-free periods, and to pay tradesmen overtime to speed up repair times and limit downtime. It also limits any reduction in turnover or revenue to maintain normal business operations.

Claims Preparation Costs

Covers the cost of professional fees for the preparation, presentation and settlement negotiations for various types of large commercial property claims.

What do Claims Look Like?

We have seen first hand how serious claims can be with regards to a vacant property. Thieves are probably the most frequent source of claims, breaking and entering to steal valuable materials such as copper and lead pipes.

One property we insure incurred over $200,000 worth of damage when thieves destroyed water pipes to access copper pipes, leaving water flowing through a building until its next inspection (5 days). They even destroyed an entire change room, smashing basins and ceramic shower rooms, just to access metal washers in the taps. We estimate they got away with less than $5,000 worth of valuable items.

An Insurer we spoke with paid out in excess of $1,000,000 for a similar scenario where around $20,000 worth of valuables were actually stolen. With regular occurrences such as these, it’s no wonder why insurers are reluctant to offer insurance for vacant buildings.

What are the Price Influencers?

Outside of the building being vacant, there are still other factors which determine whether an insurer will offer a policy, and how much they will charge for it including:

Type of property (Office/Mixed use/Industrial)

Size or value of property (Buildings over $5,000,000 in value become harder to insurer)

How long the building has been vacant (longer makes it more difficulty)

Having a previous policy cancelled

Previous claims made against the property

What are the quote requirements?

Get in touch with us to obtain quotes for your vacant property. Please complete and return the form to us so we may negotiate the market on your behalf. A fully completed form does not guarantee we’ll be able to obtain insurance for you, terms are provided on a case by case basis from our insurers.

Why Should I Contact KBI?

At KBI, we have leveraged our networks, strong relationships and our depth of knowledge of the Commercial Property space to customise insurance solutions for Property Owners, Developers and Property Managers. As experts in this area of insurance, we work closely with our clients to understand their unique needs. We approach insurance companies on your behalf to get a range of coverage and pricing options. We compare these options and present our recommendations to you. We then secure the insurance that you select and review it with you annually.

Commercial Property Insurance Team

commercial property insurance
Account Executive
tyson jeffrey
Account Manager

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